Are Airdrops Taxable in Australia?
- 24th of March, 2025
- 2 min read
Cryptocurrency airdrops, often seen as “free money,” are a popular method for blockchain projects to distribute tokens and promote their platforms. However, in Australia, receiving an airdrop comes with tax obligations that all crypto enthusiasts need to understand. Here’s a comprehensive guide to how airdrops are taxed in Australia.
What Are Crypto Airdrops?
Crypto airdrops involve distributing free tokens or coins to wallet addresses, typically as part of a marketing campaign or as rewards for holding specific cryptocurrencies. While they may seem like a windfall, the Australian Taxation Office (ATO) considers most airdrops taxable events.
How Are Airdrops Taxed in Australia?
The taxation of crypto airdrops in Australia generally falls under two categories: Income Tax and Capital Gains Tax (CGT).
Income Tax on Airdrops
The ATO views most airdrops as ordinary income. This means the fair market value (FMV) of the tokens on the day you receive them must be reported as income.
For example, if you receive 300 tokens valued at AUD 3.50 each, you must report AUD 1,050 (300 x 3.50) as income in your tax return.
This applies whether the tokens were received as part of a marketing campaign or unsolicited
Capital Gains Tax (CGT) When Selling Airdropped Tokens
If you later sell or dispose of your airdropped tokens, any profit is subject to CGT.
The cost basis for these tokens is their FMV on the day you received them. For instance:
If you sell the tokens for AUD 4 each after initially reporting them at AUD 3.50, your capital gain per token is AUD 0.50.
Holding the tokens for more than 12 months may qualify you for a 50% CGT discount.
Exceptions: Initial Allocation Airdrops
Not all airdrops are taxed upon receipt. The ATO provides an exception for initial allocation airdrops. These include distributions where:
Tokens are allocated during the launch of a project.
No payment or service was required to receive them.
For such cases:
The receipt of tokens is not taxable as income.
The cost basis is zero if received for free or the amount paid to acquire them.
However, CGT still applies when these tokens are sold or otherwise disposed of.
Key Considerations and Grey Areas
Certain scenarios introduce complexities:
Non-Tradable Tokens at Receipt: If an airdrop token has no market value at receipt (e.g., it’s not yet tradable), determining its FMV can be challenging. In such cases, consulting a crypto tax accountant is advisable.
Unsolicited Airdrops: Even if you didn’t request an airdrop, it may still be taxable once it appears in your wallet and becomes accessible.
How to Report Airdrop Taxes
To comply with Australian tax laws:
Record the FMV of all received tokens on the date of receipt.
Include this amount in your annual income tax return under “Other Income.”
Keep detailed records of transactions for future CGT calculations when disposing of the tokens.
Conclusion
In Australia, most cryptocurrency airdrops are taxable events subject to Income Tax upon receipt and CGT upon disposal. Exceptions exist for initial allocation airdrops, but understanding the nuances is essential to avoid compliance issues with the ATO.
For accurate reporting and peace of mind, consider using crypto tax software or consulting an experienced crypto tax accountant. By staying informed and organised, you can navigate the complexities of crypto taxation with confidence!